VICINITY ACQUIRES SECOND OUTLET CENTRE WITHIN WEEKS
Written on the 23 May 2016
VICINITY Centres (ASX:VCX) has bolstered its retail portfolio after acquiring DFO Brisbane for $55 million.
The Melbourne-based asset manager will occupy the outlet centre under a sub-lease with Brisbane Airport Corporation (BAC), which owns the head lease over the land and buildings.
The head lease expires in 2046 and BAC has an option to extend for another 50 years, with Vicinity to pay ground rent over the term of the lease.
Vicinity CEO and managing director Angus McNaughton says the deal strengthens the group's portfolio of outlet centre assets.
"We are excited to be acquiring Queensland's leading outlet centre, the DFO Brisbane business, less than three weeks after entering into a joint venture agreement to develop a new outlet centre at Perth Airport," McNaughton says.
"Vicinity's outlet centre portfolio, including DFO Brisbane, now has a combined value of over $1.1 billion in assets under management.
"The acquisition of the DFO Brisbane business provides Vicinity with the opportunity to enhance the performance of the asset over time, in line with the improvements made to our existing outlet centre portfolio."
He says Vicinity has been operating DFO outlet centres since 2010, following the acquisition of DFO Homebush in NSW and DFO South Wharf, Essendon and Moorabbin in Victoria.
Located next to Brisbane Airport, DFO Brisbane is strategically placed to capture approximately 1.3 million local residents and more than 22 million travellers passing through each year.
The single-level centre opened in 2005 and was expanded last year, with 26,100sqm of gross lettable area and 150 tenancies.
Annual sales to the end of March totalled $190 million - up 9.5 per cent compared to the previous year.
The asset is forecast to generate an initial yield on cost of 7.5 per cent and a 10-year internal rate of return of 9.5 per cent.
The transaction is expected to be settled next month subject to approval by BAC.